Cache Logistics Trust - Keep Looking Forward

3Q18 DPU from operations down 3.3% y-o-y…

Revenue increased 14.8% y-o-y to S$31.5m, mainly due to the nine Australian warehouses which were acquired in Feb, higher revenue from Schenker’s new lease agreement, the top-up to market rental following the 51 Alps Avenue resolution, and higher revenue from CWT Commodity Hub.

Poised for industry recovery

We believe that CACHE is reasonably positioned for the industrial sector recovery given its lease expiry profile and high-proportion of multi-tenanted properties. We expect rents within the portfolio to bottom at end-2018 or early 2019. We are cognizant of the potential impact of US-China trade tensions on business sentiment, but still expect to see operational improvement from CACHE with the improvement in the demand-supply balance.

As it stands, only 2.0% of CACHE’s portfolio by gross rental income is up for renewal for 4Q18 while 28.2% is up for renewal in 2019.

Meanwhile, portfolio rebalancing continues to be active. Earlier in Oct, CACHE announced the proposed divestment of Jinshan Chemical Warehouse in Shanghai for ~S$17.8m, a 22.5% premium over the original purchase price when it was acquired in Jun 2011. The divestment is expected to be completed by the end of the year.

As at 30 September 2018, CACHE’s portfolio occupancy stood at 96.9%.

After adjustments, our fair value falls from S$0.81 to S$0.78. As at 26 Oct’s close, CACHE is trading at 8.2% FY18F yield. Using Bloomberg consensus, CACHE is trading at a blended forward dividend yield of 8.6%, 0.6 standard deviations above its average since listing.

Stock analysis research and articles on this site are for the purpose of information sharing and do not serve as recommendation of any transactions. You will need to make your own independent judgment regarding the analysis. Source of the report is credited at the end of article whenever reference is made.